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Credit Unions vs. Banks

How are credit unions different from banks?

A credit union is a cooperate financial institution that is owned and controlled by its members.  Credit unions differ from banks and other financial institutions in that the members who have accounts in the credit union are the owners of the credit union.  Bank customers are not part owners unless the stock holders in that bank.

Credit union policies governing interest rates and other matters are set by a volunteer Board of Directors elected by and from the membership itself.  Bank customers have no vote to elect the board, unless they own stock in the bank.  Only a member of a credit union may deposit money , or loan money from the credit union.  As such, credit unions have historically marketed themselves as providing superior member service and being committed to helping members improve their financial health.  Banks are designed to focus on profits not people.

Credit unions may be viewed as non-profit organizations, or alternatively as for profit enterprises charged with making profit for their members (who receive any profits earned in the form of dividends paid on savings, or reduced interests rates on loans).  Banks mainly return profits to shareholders instead of passing benefits to customers.

Credit unions typically pay higher dividend (interest) rates on shares (deposits account) and charge lower interest on loans than banks.  Credit unions revenues (from loans and investments) do, however, need to exceed operating expenses and dividends (interest paid on deposits) in order to maintain capital and solvency.

Credit unions offer many of the same financial services as banks, including but not limited to; share accounts (savings account), share draft (checking account), share term certificates (certificates of deposit), IRA's, credit cards, loans, and online services.